Upping pension age is the clear way forward

Ryan Heath

Those outraged by pensions at 70 should think again. We can make this change now amidst growth or during a genuine debt crisis down the track.

Workers under 45 have spent their lives paying-as-they-go for education and health and over-paying for property. It is not fair or sustainable to ask these generations to fund their larger parent generations through an endless retirement.

"Increasing the pension age to 70 is the responsible and fair thing to do." Photo: Jessica Shapiro

Age pensions originated a century ago, when most people died before reaching pensionable age. Today the pension age remains virtually the same while life expectancy is 20 years greater and work is far less strenuous and dangerous.

For a quarter of a century Australians have benefited from Paul Keating’s superannuation vision. A system designed to supplement our incomes, extend them through longer life and get us ready to live with a different state pension system.

That day has arrived. To argue we did not know change was coming to pensions is a bit rich; I was discussing this inevitability in my high school economics class in 1995.

We have also lived through 23 years of economic growth and mostly low unemployment. For nearly all Australians there has never been a better time to save or to accrue and draw down on assets.

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To maintain the pension age is an unreasonable tax on young Australians who themselves will never get a pension at 65. Their only certainty is paying for the healthcare of todays over-50s.

We could deal with these ageing costs in other ways: increased immigration or increase taxes, for example. We can cut investments in the future (education, research, infrastructure), or we could rob Peter to pay Paul via cuts to hospitals and care. None is palatable.

Let’s also look at the mythical 69-year-old manual worker. Not the cashier at the local shop, but the roadside worker, the construction man, the hotel cleaner. How many of these people really exist? We need to deal in facts not imaginary problems.

Today’s system is no nirvana. My mother, 61, was told by her doctor to retire or risk death in her 50s, but qualifies for neither a disability pension nor an age pension. How is today’s safety net working out for her? We are wrong to idealise what already exists.

Any universal social system has to be based around the majority who work behind one desk or another, and the economic facts of their skills and employment.

Targeted payments and occupational exceptions could enable a different system, but are a slippery slope. Take Greece for example. Until 2013 reforms most Greeks retired around 60 and 580 job categories were deemed arduous or hazardous, allowing retirement at 50 for women and 55 for men. That included airline staff, farmer’s wives and hairdressers.

'To maintain the pension age is an unreasonable tax on young Australians who themselves will never get a pension at 65.'

Greece is not the economic company Australia wants to keep. So what did well-managed Norway do when faced with the pension question? That other developed, rich, social democracy with natural resources linked the pension to life expectancy so that it rises to 70.

Life expectancy will be 90 when the pension age of 70 kicks in. We have the most developed superannuation system in the world and can raise employer contributions to 15 per cent as Keating envisaged, and as Norway has recently done. But we already have the foundation to make the leap.

We can take exception to many parts of the 2014 budget: the slashing of educational opportunities and the excision of twenty-somethings from unemployment benefits. But tackling a structural problem caused by an already pampered generation is not something we can avoid. Those who grew up with, and benefited from, the expansion of the welfare state must now also live with the fiscal consequences.

The Labor base and the ALP itself need to remember that the point of progressive parties is not to set the progress of one generation in aspic. The victorious vested interest of one era must eventually face the legitimate needs and claims of those who follow. That is the only way to maximise opportunity, prosperity and fairness; the true point of any welfare system.

Increasing the pension age to 70 is the responsible and fair thing to do.

Ryan Heath was an adviser to Peter Garrett, a former minister in the Rudd/Gillard government.